The Ford Motor Co. found itself last year with a factory to spare.
Its new plant in the farmlands of Kentucky was designed to make batteries for electric vehicles, which have seen a sharp decline in demand. So in December, one of the country’s oldest automakers declared it would spend $2 billion to transform the facility for a hot new market: energy storage for data centers.
Analysts think Ford faces an uphill battle. The Detroit company is jumping into a market where its competitors — like Tesla — have a big head start. It’s unclear whether the kind of battery Ford plans to make is the kind that data centers can use. And Ford plans to use Chinese technology, which remains controversial in Washington.
“While there is opportunity there, I think there’s a number of factors that can make it difficult for Ford,” said Allison Weis, an energy-storage analyst at the market research firm Wood Mackenzie.
The carmaker, which pioneered modern manufacturing methods a century ago, is betting on a tidal wave of battery demand as well as favorable tax credits.
“This is a customer-driven shift to create a stronger, more resilient and more profitable Ford,” CEO Jim Farley said in a statement in December. “The operating reality has changed, and we are redeploying capital into higher-return growth opportunities … like our new battery energy storage business.”
The factory where all this will take place, a sprawling 1,500-acre site amid fields of corn and soybeans, used to have a very different mission.
Dubbed the BlueOval SK Battery Park, it spoke to the scale of the automaker’s EV vision. Ford and its principal battery partner, the Korean firm SK On, would together spend $5.8 billion, the largest development project in Kentucky history. They would make 80 gigawatt-hours of batteries a year, enough to supply more than 800,000 F-150 Lightning electric pickup trucks. And this was just one of two battery clusters the joint venture would run, the other under construction nearby in Tennessee.
By December, however, the scope of the American EV retreat was painfully apparent. Sales fell off a cliff in the fall after President Donald Trump and congressional Republicans killed the $7,500 subsidy for new EV purchases.
As the year wound down, Ford and SK did the same with their joint venture. They split their assets, with SK taking over the Tennessee battery plant and Ford assuming control of the Kentucky one.
They aimed for an amicable relationship where SK would continue to supply EV batteries to Ford. But Ford would need a lot less of them. After all, the automaker was simultaneously ending production of the F-150 Lighting, which it once hailed as its signature vehicle of the electric age.
In its place, Ford plans to release a budget-priced, midsize electric pickup truck next year. Overall, Ford has had to write off $19.5 billion in losses for its EV division.
The Kentucky lurch
Waiting anxiously on Ford’s new plan is Kentucky.
When Ford and SK announced their factory in 2021, state leaders touted the promised creation of 2,500 manufacturing jobs. Kentucky landed the project in part by offering the joint venture a $250 million loan.
But once Trump took office — and rolled back federal EV support — a five-year boom in EV sales came to an end. The Blue Oval EK joint venture dissolved just a few months after the end of the $7,500 tax credit, and 1,600 workers at the Kentucky plant were laid off after making batteries for just a few months.
Republicans have used the factory closing, and the resulting uncertainty, to criticize Democratic Gov. Andy Beshear, a potential 2028 presidential candidate. Robert Stivers, the Republican president of the state Senate, has called the battery factory “the biggest boondoggle of economic recruitment in the state’s history.”
Ford has said it will employ 2,100 workers for the energy storage pivot. The terms of the original $250 million loan are “still under negotiations,” Beshear’s office said in a statement to POLITICO’s E&E News.
As to the factory itself, Beshear said: “I am confident that Ford’s new plan to make storage batteries will be successful and support thousands of jobs in the commonwealth.”
Southern split
Ford’s new plan turned its former business partner, SK, into a data-center rival.
Like Ford in Kentucky, SK said after the breakup that it would use its perch in Tennessee to enter the market for “stationary energy storage,” the catch-all term for batteries that stay in one place and supply power to buildings or the electric grid.
In a statement to E&E News, Ford said it was confident its plan would succeed because of “surging customer demand.” It also cited a favorable tax situation: Republicans gutted many clean energy incentives in their megalaw last year, but kept a generous production tax credit for factories that make batteries.
The new product looks, and is, entirely different from the old one. Instead of blocks several feet wide that fit in a vehicle’s undercarriage, Ford’s Kentucky factory is intended to marshal massive stacks of batteries into 20-foot-long containers that could be trucked to customers’ sites. These power centers would deliver 5 megawatt-hours, the same quantity of battery cells that would be used by 54 F-150 Lightnings.
It is a field positioned to grow, as expanding use of renewable energy and the congestion on the electric grid make storage of energy ever more useful. Wood Mackenzie estimates that the energy-storage business will see a moderate upswing over the next couple of years because of tariff and supply-chain chaos, then grow fast at the end of the decade.
Around the globe, installations of energy storage — led by lithium-ion batteries — leapt by nearly a quarter last year, to 92 gigawatts, according to a recent estimate by BloombergNEF. China led those deployments, with the U.S. in a distant second.
The research firm predicted installations could grow to eight times that level by 2035.
Playing catch-up
Ford is a late entrant to the battery storage business.
One formidable and experienced set of competitors are Korean. Two leading battery makers — LG Chem and Samsung SDI — are also supplying U.S. automakers but moving into the stationary-storage space from their U.S. factories as the EV market slows.
Their experience is similar to that of Ford’s erstwhile partner, SK On. That Korean firm started making lithium-ion batteries 30 years ago, and opened its first battery factory in 2012. Its first U.S. factory, in Georgia, opened in 2022, and it has since added two more in the state.
Another rival is Tesla, whose experience shows that energy storage can be a profitable business.
As Tesla’s car sales have treaded water in the last couple of years, its stationary-energy business has been a bright spot. The company reported last month that its energy storage deployments grew 49 percent over the past year. That Tesla is still a profitable company is in part because of these non-car batteries, which it makes in a dedicated factory in California.
But it has also taken Tesla a while to get there.
Ford said it plans to produce 20 GWh from its factory by the end of 2027. Tesla reached that level of production in 2024, five years after it first made grid-scale batteries and more than a decade after it began with smaller-scale solutions for homes and businesses.
AI and batteries
Ford says a primary customer for its batteries will be artificial intelligence data centers. Analysts say these huge data-processing buildings will use batteries because energy storage is a multitool that can play many roles.
However, Ford and other battery suppliers must contend with uncertainty. It’s not clear which of the battery’s roles will be the most useful or valuable — or whether AI will need all the batteries that Ford and its rivals intend to make.
“We’re still in the early days,” said Weis, the Wood Mackenzie analyst.
Today, data center batteries are mostly used on the margins. They play a role in frequency regulation and frequency response, meaning ironing out the dips and fluctuations in the power supply. They can do what’s called peak shaving, or clipping off the highest demands of a data center, to avoid the most expensive and hard-to-deliver electricity.
“If you need a little injection of power into the grid, or need to take a little power off the grid, you can do that,” said Tom Wilson, a battery specialist at the Electric Power Research Institute (EPRI), a nonprofit energy research organization.
In coming years, that relatively minor role seems destined to grow because of how data centers manage their energy demands.
Google, for example, has an evolving relationship with renewable energy. In 2020, it upped a prior commitment to use only clean electrons to feed its data centers. It said that by 2030, it would become the first big data-center host to use clean energy every hour of the year, a difficult technical feat that better reflects a company’s carbon footprint. The tech giant would do so, said CEO Sundar Pichai, in part by “increasing our use of battery storage.”
Such commitments, said Wilson, are leading data centers toward larger batteries that can shift power — for example, by storing solar power generated at 2 p.m. and using it at night.
The sheer size of the data centers currently on the drawing board suggest that a lot more batteries will be needed. Five years ago, Wilson said, the average data center used 25 megawatts, roughly the amount used by 20,000 homes. Today, it’s 150 MW. Future data centers are slated at 5,000 MW. One titanic data-center hub in Texas is proposed to reach 11,000 MW — or more than 400 times the size of a typical center of a few years ago.
That kind of juice isn’t easy to come by.
“The single biggest constraint is power,” Amazon CEO Andrew Jassy said on a call with analysts last year, discussing the internet giant’s AI needs.
Amazon and other AI aspirants are in a hurry, but sources of new electricity — natural gas, solar or nuclear plants— all come online slowly. And the U.S. grid is congested, with more demand than the wires can handle.
That’s why Jigar Shah, who headed the Energy Department’s Loan Programs Office under former President Joe Biden, thinks batteries could fill the “gap between what the system needs and what traditional resources can deliver on time,” as he wrote on LinkedIn.
“Batteries aren’t a silver bullet — but they are uniquely aligned with today’s constraints,” Shah wrote.
Is Ford a fit?
A traditional data center’s power draw is huge but stable. It is essentially a digital warehouse, from which users stream a movie or access a photo or document. Its power needs don’t change much throughout the day.
AI data centers do things differently.
The AI data center is much more dynamic. It might be training or processing vast data sets to learn to recognize patterns. It might be doing what is called inference: using its already-trained AI model to carry out tasks like translating languages or generating a custom image. Both training and inference ask computer servers to crunch vast tides of data simultaneously.
That rhythm, from quiet to busy, means AI data centers can “swing their power load very quickly,” Weis said, ramping up from 10 percent of their available electrons to 90 percent in just a few minutes.
Those wild power swings might not harmonize with the kind of battery Ford is developing. Ford (and Tesla) are focused on lithium-iron batteries, also known as LFP, which have easy-to-obtain ingredients and are less expensive to make than previous battery iterations. LFP is a good fit with cars, which move at generally consistent speeds and so require a steady discharge from the battery.
AI data centers, by comparison, need batteries meant to charge and discharge in short, powerful bursts.
“Auto batteries, they don’t like that,” said Wilson.
Furthermore, a data-center battery is not just a larger version of the power block for a Ford Mustang Mach-E. It must be wired and programmed differently.
“A lot of the challenges are in the integration of the system,” said Erin Minear, an energy storage expert at EPRI. “It’s not just battery cells, it’s layers of controls, it’s a battery management system.”
The China conundrum
Ford faces an additional risk: Those LFP batteries they’ll make in Kentucky are originally from China.
Three years ago, Ford licensed a product of Contemporary Amperex Technology, or CATL, the Chinese firm that is the world’s leading lithium-ion battery-maker.
That put Ford on the horns of a dilemma. China’s long experience making batteries means it can help Ford make its cars — and now its data-center power blocks — inexpensive and competitive. But it is exposed to attacks from China hawks in Washington who see CATL as an economic and espionage threat from a competing superpower.
Republicans, especially those on the House Select Committee on China, have repeatedly questioned Ford’s role with CATL. Those concerns arose again with Ford’s pivot.
“Ford’s revised business plan raises important questions about whether the original licensing terms have been updated, expanded, or otherwise altered to accommodate the company’s new focus on energy storage systems and data center markets,” Rep. John Moolenaar (R-Mich.), the chair of the select committee, wrote in a letter last month to Ford.
The CATL relationship puts Ford’s access to battery tax credits in peril. The Republican megalaw includes stricter guidelines on what relationships U.S. companies can maintain with China. But the Trump administration hasn’t yet ironed out the details, creating uncertainty for Ford and other companies that count Chinese firms as business partners.
Farley told Bloomberg at the time of the company’s pivot that keeping China close would be more productive than keeping it away.
“We have a licensing agreement, but we feel like it’s better to build these batteries in the United States with American workers, with our own Ford workers and understand the IP than to import them like they’re being done today. The best way to compete with the Chinese is to get close to the IP and then run the plants at Ford. When Ford knows how to build things, we know how to do this, so I think this is much better for America,” Farley said.
